U.S. stocks tumbled Tuesday as investors digested new economic data as well as Friday’s ruling that most of President Donald Trump’s sweeping country-specific tariffs are illegal.
The Nasdaq Composite slid more than 1.5% and the S&P 500 dropped more than 1.3% as of midday trading. The Dow Jones Industrial Average also fell more than 500 points.
Several Wall Street analysts raised concerns Tuesday morning about the potential that more than $120 billion in tariff revenue received so far this year might need to be paid back. Trump’s tariffs will remain in effect for now as the legal process plays out and a lower court reconsiders the case.
U.S. Treasury yields, already elevated by broader investor worries about debt levels and economies elsewhere, especially Europe, spiked to as high as 4.97% for a 30-year U.S. government bond and 4.30% for the 10-year Treasury.
The higher that Treasury yields move, the more it costs the government to borrow money. Under a scenario where tariff revenue needs to be refunded to consumers and companies, the U.S. may need to issue more Treasuries at those higher yields to pay for the refunds.
Treasury Secretary Scott Bessent said on Monday that the administration expected the Supreme Court to uphold Trump’s tariffs but was also preparing other ways to deploy country-specific rates.
That scenario could also further stress the country’s financial situation and $37 trillion in debt.
September is already typically the worst month for stocks, which have recently hit record highs. The renewed tariff uncertainty also comes alongside fresh data showing that the U.S. manufacturing sector contracted for a sixth straight month.
In its survey, the Institute for Supply Management noted comments from a trucking industry respondent that said the industry “continues to contract” and is “much worse than the Great Recession of 2008-2009.”
A food and beverage industry company also told ISM that “everything…is about to get significantly more expensive” due to high tariffs such as the 50% applied to Brazilian goods.
“Tariffs continue to wreak havoc on planning/scheduling activities,” a computer industry company also said.
Major companies are also sounding the alarm about consumers.
Speaking on CNBC, McDonald’s CEO Chris Kempczinski said Tuesday the fast-food giant has observed “a two-tier economy” recently with lower and middle income consumers ” feeling under a lot of pressure right now.”
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